On January 2, 2020, Monty Company sells production equipment to Fargo Inc. for $47,000. Monty includes a 2-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on January 2, 2020. During 2020, Monty incurs costs related to warranties of $870. At December 31, 2020, Monty estimates that $690 of warranty costs will be incurred in the second year of the warranty. (a) Your answer is correct. Prepare the journal entry to record this transaction on January 2, 2020, and on December 31, 2020 (assuming financial statements are prepared on December 31, 2020). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit 2, 2020 Cash 47,000 Sales Revenue 47,000 ng 2020 Warranty Expense 870 Cash, Labor, Parts 870 31, 2020 Warranty Expense 690 Warranty Liability 690 Repeat the requirements for (a), assuming that in addition to the assurance warranty, Monty sold an extended warranty (service- type warranty) for an additional 2 years (2022-2023) for $820. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit
On January 2, 2020, Monty Company sells production equipment to Fargo Inc. for $47,000. Monty includes a 2-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on January 2, 2020. During 2020, Monty incurs costs related to warranties of $870. At December 31, 2020, Monty estimates that $690 of warranty costs will be incurred in the second year of the warranty. (a) Your answer is correct. Prepare the journal entry to record this transaction on January 2, 2020, and on December 31, 2020 (assuming financial statements are prepared on December 31, 2020). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit 2, 2020 Cash 47,000 Sales Revenue 47,000 ng 2020 Warranty Expense 870 Cash, Labor, Parts 870 31, 2020 Warranty Expense 690 Warranty Liability 690 Repeat the requirements for (a), assuming that in addition to the assurance warranty, Monty sold an extended warranty (service- type warranty) for an additional 2 years (2022-2023) for $820. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:On January 2, 2020, Monty Company sells production equipment to Fargo Inc. for $47,000. Monty includes a 2-year assurance
warranty service with the sale of all its equipment. The customer receives and pays for the equipment on January 2, 2020. During
2020, Monty incurs costs related to warranties of $870. At December 31, 2020, Monty estimates that $690 of warranty costs will be
incurred in the second year of the warranty.
(a)
Your answer is correct.
Prepare the journal entry to record this transaction on January 2, 2020, and on December 31, 2020 (assuming financial
statements are prepared on December 31, 2020). (Credit account titles are automatically indented when the amount is entered. Do not
indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
2, 2020
Cash
47,000
Sales Revenue
47,000
ng 2020
Warranty Expense
870
Cash, Labor, Parts
870
31, 2020
Warranty Expense
690
Warranty Liability
690
Repeat the requirements for (a), assuming that in addition to the assurance warranty, Monty sold an extended warranty (service-
type warranty) for an additional 2 years (2022-2023) for $820. (Credit account titles are automatically indented when the amount is
entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
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